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Transcript

Finding Financial Freedom · A Little Bit Richer

• 0:00
  Kia: Hey, it's Kia. Throughout this series, we've been exploring different
• 0:04
  Kia: ways to save and grow your money. In this episode,
• 0:07
  Kia: I want to focus on what your money can actually
• 0:10
  Kia: get you. Everything's changing. It used to be you'd work
• 0:13
  Kia: one job all your life and then retire, but these
• 0:16
  Kia: days there are so many different approaches to work and
• 0:18
  Kia: leisure. So today, I'm talking to Jenny Hazan, Director of
• 0:22
  Kia: Customer Value Management at Legal & General, about all the different
• 0:25
  Kia: choices out there, and the freedom our finances bring us
• 0:28
  Kia: to make these choices. So, Jenny, there are many different
• 0:33
  Kia: approaches to work and finances out there. People are doing
• 0:36
  Kia: FIRE, they're taking sabbaticals, they're having portfolio careers. Can you
• 0:41
  Kia: talk me through a few of these different options?
• 0:43
  Jenny Hazan: Yeah, totally, Kia. So as you said, that distinction between
• 0:47
  Jenny Hazan: working life and retirement used to be really clear. In
• 0:50
  Jenny Hazan: fact, we worked at one organization, probably stayed in the
• 0:53
  Jenny Hazan: same industry, maybe even at the same company for all
• 0:57
  Jenny Hazan: of our career. And then on a set date, we
• 0:59
  Jenny Hazan: suddenly became retired, and hopefully by that point the kids
• 1:02
  Jenny Hazan: have moved out, you paid off the mortgage, and now
• 1:04
  Jenny Hazan: was the time that you got to enjoy life. And
• 1:07
  Jenny Hazan: I think people are looking for more financial freedom, flexibility
• 1:11
  Jenny Hazan: and choice, and they're looking for different options. Even just
• 1:15
  Jenny Hazan: friends of mine actually, that have taken on new ways
• 1:18
  Jenny Hazan: of doing this. So a portfolio career, for example, is
• 1:20
  Jenny Hazan: where you may choose to be freelance, you may choose
• 1:23
  Jenny Hazan: to work on a number of projects that are related
• 1:26
  Jenny Hazan: or unrelated, working for companies and organizations that are interesting
• 1:30
  Jenny Hazan: to you, that you're passionate about. I also have a friend
• 1:33
  Jenny Hazan: that's recently taken a sabbatical. So a sabbatical is a
• 1:37
  Jenny Hazan: period of time where you will agree with your company
• 1:40
  Jenny Hazan: to take unpaid, usually unpaid, time off, so maybe three
• 1:44
  Jenny Hazan: months or six months, to focus on other passions or
• 1:47
  Jenny Hazan: things like travel. And then in addition to that, because
• 1:50
  Jenny Hazan: of the pandemic and because of our ability to connect
• 1:53
  Jenny Hazan: with the working world from lots of different places, lots
• 1:56
  Jenny Hazan: of people are choosing to be digital nomads, work from
• 1:59
  Jenny Hazan: wherever they are, abroad. And I think people are really
• 2:02
  Jenny Hazan: looking for opportunities to do things a little bit differently.
• 2:06
  Jenny Hazan: So there's definitely a push for people to think about, "
• 2:10
  Jenny Hazan: Well, can I work for a certain period of time?
• 2:12
  Jenny Hazan: And then only work if I need to work?" And
• 2:14
  Jenny Hazan: we mentioned FIRE, so FIRE stands for financial independence, retire
• 2:20
  Jenny Hazan: early, and that's a movement that started off in the
• 2:22
  Jenny Hazan: US and became popular probably from about 2010 onwards. And
• 2:26
  Jenny Hazan: the main principles are about saving as much as you
• 2:30
  Jenny Hazan: possibly can, investing as much as you can, living off
• 2:35
  Jenny Hazan: less of the world's resources, but living well. But people
• 2:39
  Jenny Hazan: that are taking on the FIRE movement, are tending to
• 2:41
  Jenny Hazan: save a lot more than what most people can usually
• 2:44
  Jenny Hazan: save. So up to 70% of their income. And they're
• 2:49
  Jenny Hazan: usually aiming to get around about 25 times their living
• 2:53
  Jenny Hazan: expenses, so that they can invest that money and live
• 2:55
  Jenny Hazan: off the investment returns. Now that might seem a little
• 2:59
  Jenny Hazan: bit extreme and it does mean a lot of sacrifice,
• 3:02
  Jenny Hazan: but I think what this shows is that people are
• 3:05
  Jenny Hazan: looking for different options for themselves. I know for me
• 3:08
  Jenny Hazan: personally, travel's really important, and so I want to be
• 3:12
  Jenny Hazan: able to have a lifestyle that over time my working
• 3:15
  Jenny Hazan: life will allow me to do that.
• 3:16
  Kia: It is great hearing the different ways that people are
• 3:20
  Kia: actually taking charge of their finances and taking charge of
• 3:23
  Kia: how they work. It is so key, because this generation
• 3:26
  Kia: is very much thinking about the future and thinking about
• 3:29
  Kia: different ways, like you mentioned, our parents or our grandparents,
• 3:33
  Kia: their generation was like you said, one job, work till
• 3:36
  Kia: you retire, retire, then that's it. And now we're kind
• 3:39
  Kia: of saying, " No, I actually want a bit more freedom.
• 3:40
  Kia: What can I do to get more freedom?" So I
• 3:43
  Kia: want to ask you then, how can our finances help
• 3:47
  Kia: us to access these different choices that we've got?
• 3:49
  Jenny Hazan: Yeah, so I think the principles, even if we talk
• 3:52
  Jenny Hazan: about FIRE where we say, " Oh gosh, that's quite extreme,"
• 3:54
  Jenny Hazan: but the principles of it still stand strong, which is
• 3:58
  Jenny Hazan: save as much as you can as early as you
• 4:00
  Jenny Hazan: can. And the reason for that is because the earlier
• 4:03
  Jenny Hazan: you save, the more time that money has to potentially
• 4:06
  Jenny Hazan: grow. And I think with so many different choices available
• 4:10
  Jenny Hazan: to us now, it can be quite difficult to think
• 4:12
  Jenny Hazan: ahead to the things that you might want to do.
• 4:15
  Jenny Hazan: So actually setting out some goals, whether those be long-
• 4:18
  Jenny Hazan: term, medium, or short- term, so that could be anything
• 4:21
  Jenny Hazan: from having flexibility around your career, to saving up a
• 4:25
  Jenny Hazan: deposit, to just being able to afford some nicer little
• 4:28
  Jenny Hazan: luxuries in life, is really, really important. But that takes
• 4:32
  Jenny Hazan: budgeting, that takes saving, and also working towards a goal.
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  Jenny Hazan: I think sometimes it can be quite hard to think
• 4:40
  Jenny Hazan: about starting these sorts of things, so one of the
• 4:43
  Jenny Hazan: things about thinking about these goals, and actually starting to
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  Jenny Hazan: picture them in your head, is that you then have
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  Jenny Hazan: a much clearer motivation for doing the work that you
• 4:52
  Jenny Hazan: need to do in order to plan for this.
• 4:54
  Kia: I love goals so much. I'm glad you touched on
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  Kia: it, because I think when you come to your finances
• 5:00
  Kia: and you come to planning, or saving, or anything to do with
• 5:02
  Kia: your finances, and you're almost saving aimlessly, it can feel like, "
• 5:06
  Kia: Why am I doing this?" But when you have a
• 5:07
  Kia: goal in mind, that can help. And I'm someone who's
• 5:10
  Kia: very visual, so I put my goals down on a
• 5:12
  Kia: vision board-
• 5:13
  Jenny Hazan: Same.
• 5:13
  Kia: ... so I know... (inaudible) . ... so I know at the foot of
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  Kia: my bed or wherever I choose to place it at
• 5:18
  Kia: my house, I can wake up, and when you have
• 5:20
  Kia: those days like, " Oh, I just want to spend my
• 5:21
  Kia: money on... I just don't want to do this," you can
• 5:23
  Kia: kind of look at your vision board, and see, actually,
• 5:27
  Kia: I know I'm saving, because I want to get to
• 5:29
  Kia: this or I'm investing for this reason. And it helps
• 5:31
  Kia: to keep you on track, which is so good. And
• 5:34
  Kia: I'm so glad you mentioned goals, because it's just really,
• 5:36
  Kia: really important. Now, you touched on it a little bit
• 5:39
  Kia: just now, but what can our listeners be doing with
• 5:42
  Kia: their finances now, that can give them as much freedom
• 5:46
  Kia: as possible in the future with their finances?
• 5:49
  Jenny Hazan: Once you're clear about your goals and what those goals
• 5:52
  Jenny Hazan: might look like, what sort of money you might need
• 5:55
  Jenny Hazan: to afford those goals, the first thing is really to
• 5:58
  Jenny Hazan: have a look at your finances. So what have you
• 6:00
  Jenny Hazan: got coming in, what have you got going out. How
• 6:03
  Jenny Hazan: much do you think that you could save. And I
• 6:05
  Jenny Hazan: think a lot of people sort of struggle with the
• 6:07
  Jenny Hazan: concept of, " I don't even know how much to start
• 6:10
  Jenny Hazan: with," or, " I haven't got much flexibility." So a general
• 6:14
  Jenny Hazan: rule is the 50, 30, 20 rule. So 50% of your income
• 6:19
  Jenny Hazan: would be spent on your essentials. So the needs. 30%
• 6:23
  Jenny Hazan: on your wants or the fun stuff. And then 20%
• 6:27
  Jenny Hazan: saving for the future. So you can start there, and
• 6:30
  Jenny Hazan: it will be different for different people, but what you
• 6:32
  Jenny Hazan: want to be thinking about is, " How do I build
• 6:35
  Jenny Hazan: towards financial resilience?" So what that means is, " Can I
• 6:38
  Jenny Hazan: weather the storm if something comes out of the blue?"
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  Jenny Hazan: all the way through to financial freedom, which is where
• 6:44
  Jenny Hazan: you get more flexibility with your choices over the long-
• 6:47
  Jenny Hazan: term. So to start off with, make a budget, try
• 6:51
  Jenny Hazan: and stick to it, and keep going, be consistent. If
• 6:54
  Jenny Hazan: you have a month that's tough, don't give up, keep
• 6:58
  Jenny Hazan: going. The second thing is you need to think about
• 7:01
  Jenny Hazan: emergency savings. So thinking about your living expenses and trying
• 7:06
  Jenny Hazan: to put away three months to six months of savings
• 7:11
  Jenny Hazan: that are in an easily accessible cash account, high interest
• 7:15
  Jenny Hazan: if possible, that you can gain access to. So these
• 7:18
  Jenny Hazan: are for the things that might go wrong in life.
• 7:19
  Jenny Hazan: You know, your MOT just came through and your car's
• 7:22
  Jenny Hazan: failed, or that you unfortunately lose your job, or maybe
• 7:28
  Jenny Hazan: the washing machine broke down. So these are things, emergencies,
• 7:30
  Jenny Hazan: that you need money for. And if you haven't got
• 7:33
  Jenny Hazan: three months saved away and you're thinking, " My God, how
• 7:36
  Jenny Hazan: do I do that?" start with one month, start with
• 7:38
  Jenny Hazan: one week, step- by- step. The second thing that you
• 7:42
  Jenny Hazan: can do once you've got an emergency savings budget is
• 7:45
  Jenny Hazan: start to work on something that the industry sometimes like
• 7:48
  Jenny Hazan: to call the FU fund. And that is really about
• 7:52
  Jenny Hazan: having power and having choice. So this is the ability
• 7:55
  Jenny Hazan: to walk away in situations where they're not serving you
• 7:59
  Jenny Hazan: anymore. So that might be a job that you really
• 8:01
  Jenny Hazan: hate, that's really impacting your mental health. It might be
• 8:04
  Jenny Hazan: to walk away from a relationship. It might be to
• 8:07
  Jenny Hazan: walk away from that awful flatmate that has not washed
• 8:10
  Jenny Hazan: the dishes since the day they moved in. And over
• 8:12
  Jenny Hazan: time you can continue to build that fund. So I
• 8:16
  Jenny Hazan: think that's a really important one to think about. After
• 8:19
  Jenny Hazan: that, you can start thinking about those savings goals. So
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  Jenny Hazan: the short- term, the medium- term, and the long- term,
• 8:25
  Jenny Hazan: and think about what sort of money you will need
• 8:28
  Jenny Hazan: for those goals, and at what point in your life,
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  Jenny Hazan: because that has an impact on where you want to
• 8:33
  Jenny Hazan: invest that money. So I think from a longer term
• 8:36
  Jenny Hazan: perspective, obviously a pension is a great place to start
• 8:40
  Jenny Hazan: thinking about long- term saving. Pensions can be really tax-
• 8:43
  Jenny Hazan: efficient, so if you wanted to put a hundred pounds
• 8:47
  Jenny Hazan: into your pension, £ 80 of that would come from you, £
• 8:50
  Jenny Hazan: 20 would come from the government. And also, your employer
• 8:54
  Jenny Hazan: will, if you've got a workplace pension, will also be
• 8:56
  Jenny Hazan: making contributions as well. And I think it's worthwhile mentioning
• 9:00
  Jenny Hazan: that some employers will put more money in, they'll match
• 9:03
  Jenny Hazan: your contributions. And if you're not going to that level,
• 9:07
  Jenny Hazan: you're actually leaving free money on the table, and no
• 9:09
  Jenny Hazan: one wants to do that.
• 9:11
  Kia: I love the fact that you mentioned that fund, the
• 9:14
  Kia: FU fund. I'm from a Caribbean household, so in my
• 9:18
  Kia: background we call that like the vexed fund.
• 9:19
  Jenny Hazan: The vexed fund. Love it.
• 9:20
  Kia: So when you're, like you said, when you're annoyed, just
• 9:23
  Kia: having that pot of money, but I think it is
• 9:25
  Kia: about making your finances or making your money a point
• 9:30
  Kia: to give you freedom. So like you said, freedom of
• 9:32
  Kia: choice, to decide to leave a job that you don't like, all
• 9:35
  Kia: the things that you mentioned, or freedom to cover your
• 9:39
  Kia: income if you happen to lose it for a period
• 9:40
  Kia: of time, or freedom to decide that I want to
• 9:43
  Kia: retire at 45, but I'm going to put my money aside
• 9:45
  Kia: to be able to do that. I think that's the
• 9:47
  Kia: main key here. We're just trying to get our money
• 9:49
  Kia: to work for us so it can give us more
• 9:51
  Kia: freedom. We have been talking about this and it sounds
• 9:55
  Kia: great, but I want to ask you, are there any
• 9:58
  Kia: disadvantages to all of this? Is it maybe too much
• 10:04
  Kia: to focus on so much of this for the future? Are
• 10:06
  Kia: we putting too much emphasis and too much pressure on
• 10:08
  Kia: a lot of things at once for the future?
• 10:11
  Jenny Hazan: I think that's a great question. I think it's all
• 10:13
  Jenny Hazan: about balance, and that balance is going to be really
• 10:15
  Jenny Hazan: different depending on your own financial circumstances and what you're
• 10:19
  Jenny Hazan: trying to achieve. And the worst thing that you could
• 10:22
  Jenny Hazan: do is stretch yourself so far that you end up
• 10:25
  Jenny Hazan: running up credit card bills whilst you're cleverly saving away,
• 10:29
  Jenny Hazan: but actually you might have something that's a high interest
• 10:32
  Jenny Hazan: rate debt, and you don't want to do that. You
• 10:34
  Jenny Hazan: want to pay that down. So I think this is
• 10:36
  Jenny Hazan: where it comes back to really sitting down with your
• 10:39
  Jenny Hazan: finances, getting really clear about what it is that you
• 10:42
  Jenny Hazan: really want. And I don't necessarily mean " things" in that
• 10:45
  Jenny Hazan: sense. It will be, what experiences do you want? What
• 10:48
  Jenny Hazan: sort of lifestyle would you like to have? How can
• 10:51
  Jenny Hazan: you build up to that gradually? The plus point is
• 10:53
  Jenny Hazan: if you're younger, then you've got a lot more time
• 10:55
  Jenny Hazan: to do that if you start early. And I think
• 10:59
  Jenny Hazan: sometimes we worry about whether or not we're saving enough,
• 11:03
  Jenny Hazan: whether or not we're on track, and there's lots of
• 11:05
  Jenny Hazan: tools that can help you with that. But I think
• 11:07
  Jenny Hazan: the important bit is not overstretching yourself, making sure that
• 11:11
  Jenny Hazan: you remain balanced. And if you align your savings to
• 11:15
  Jenny Hazan: your goals and to your ambitions, then it becomes a lot
• 11:19
  Jenny Hazan: easier to say, " Do you know what? I probably could've
• 11:22
  Jenny Hazan: made my lunch at home rather than buying it out.
• 11:25
  Jenny Hazan: I probably don't need that other coffee. Do I need
• 11:28
  Jenny Hazan: those new trainers?" and still give yourself a little bit
• 11:31
  Jenny Hazan: of flexibility to reward yourself. We talked about the 30%
• 11:35
  Jenny Hazan: of income on fun, because life should be fun.
• 11:38
  Kia: Life should be fun. Absolutely. I agree with you. As
• 11:40
  Kia: someone who's in their 20s, I know how important it
• 11:44
  Kia: is to balance your finances. Obviously it is very important
• 11:48
  Kia: to make sure that your money's working for you and
• 11:50
  Kia: you're planning for the future, but also, I want to
• 11:53
  Kia: make memories. I want to have fun. So it is
• 11:55
  Kia: about striking that right balance where you're not, like I
• 11:58
  Kia: said, just spending tons of money on things. That maybe
• 12:01
  Kia: if you sat down you're probably just like, "I could've done without that."
• 12:03
  Kia: But equally, you're not saving everything or investing everything, so
• 12:06
  Kia: that you can't go out with your friends one weekend and
• 12:09
  Kia: have a good time, or you can't go on that trip
• 12:11
  Kia: that you wanted to go on. It's finding that right
• 12:13
  Kia: balance, like you said. Jenny, I always end these episodes
• 12:17
  Kia: with the same questions, so I'm going to ask you,
• 12:20
  Kia: what are your three pieces of advice to help our
• 12:22
  Kia: listeners get a little bit richer?
• 12:24
  Jenny Hazan: So we talk about money here, but actually it's about
• 12:27
  Jenny Hazan: what it can allow you to do. So get really,
• 12:30
  Jenny Hazan: really deep with yourself in terms of what you want
• 12:33
  Jenny Hazan: your life to look like, what's important to you, what
• 12:35
  Jenny Hazan: your values are, because developing your goals based around this
• 12:38
  Jenny Hazan: will make it a lot easier to have the motivation
• 12:42
  Jenny Hazan: to save. The second one is save as much as
• 12:46
  Jenny Hazan: you can as early as you can, because it really
• 12:49
  Jenny Hazan: does make a big difference to the amount that you
• 12:51
  Jenny Hazan: can save over time, and you get the awesome impact
• 12:55
  Jenny Hazan: of compound growth as well. And then the third thing
• 12:59
  Jenny Hazan: is have fun with it. So I think sometimes we
• 13:02
  Jenny Hazan: are at risk of not enjoying the saving that we
• 13:08
  Jenny Hazan: do, because we see it as something to sacrifice. That
• 13:12
  Jenny Hazan: we're sacrificing things in the now for things in the
• 13:14
  Jenny Hazan: future. But actually, make it fun. Make it a game.
• 13:17
  Jenny Hazan: Think about the rewards that you can offer yourself, and
• 13:20
  Jenny Hazan: feel empowered. At the moment it can feel really stretched,
• 13:24
  Jenny Hazan: particularly with rents increasing, mortgage rates increasing, the cost of
• 13:29
  Jenny Hazan: just living is increasing, and so it can feel really
• 13:32
  Jenny Hazan: difficult to think about saving. But ultimately, we can always
• 13:36
  Jenny Hazan: start small, one step at a time.
• 13:38
  Kia: Jenny, thank you so much. This has been just a
• 13:42
  Kia: great episode for people to kind of have some food
• 13:45
  Kia: for thought, to figure out what they want their money to
• 13:48
  Kia: be doing for them. And like we keep emphasizing, striking
• 13:51
  Kia: the right balance, and also enjoying life as well. That's
• 13:54
  Kia: the important bit. So thank you so much for coming
• 13:55
  Kia: on to the episode. This has been amazing. Some great
• 13:59
  Kia: tips for planning for the future there, and that's really
• 14:02
  Kia: key. You just never know what might happen. Which is
• 14:05
  Kia: why, next week, I'm focusing on how unexpected life events,
• 14:09
  Kia: like illness, can impact your finances. It's important stuff. So
• 14:13
  Kia: if this is resonating with you, then follow the podcast
• 14:16
  Kia: and tell your friends. See you next week.